ECON 102 - Chapter 7

Practice flashcards based on key concepts and terms related to Fiscal Policy.

Fiscal Policy

Government's approach toward its own spending and taxation.

Budget Deficit

Government spending on goods and services in excess of net tax revenues.

Budget Surplus

Net tax revenue in excess of government spending on goods and services.

Net Tax Revenue (NTR)

Total tax revenue received by government less transfer payments.

Balanced Budget

The equality of net tax revenues and government spending on goods and services within a given time period.

National Debt

The sum of the federal government’s annual budget deficits less its surpluses.

Countercyclical Fiscal Policy

Government overspending during a recession and underspending during an inflationary boom to achieve full employment and stable prices.

Cyclically Balanced Budget Policy

Balancing the budget over the length of the business cycle rather than each year.

Automatic Stabilizers

Tax laws and spending programs that automatically cut back spending during a boom and increase spending in a slowdown.

Aggregate Expenditure Model

A model developed by J.M. Keynes that encompasses consumption, investment spending, government spending, and net exports.

Recessionary Gap

A situation where the economy is operating below its potential, resulting in higher unemployment.

Inflationary Gap

A situation where the economy is operating above its potential, leading to higher inflation.